MAGAZINE OF CHOICE FOR AUSTRALIA’S WEALTH INDUSTRY
www.moneymanagement.com.au
Vol. 35 No 15 | August 26, 2021
20
LICs
End of closed-ended structure?
24
INSURANCE
The case for remutualisation
The protection equation
Retail clients ‘risky’ to service
AGED CARE
BY OKSANA PATRON
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Not another Royal Commission IN the financial services industry, the words ‘Royal Commission’ are synonymous with the review led by Kenneth Hayne. It was a review that changed the landscape of the advice industry forever, but it isn’t the only one that will affect advice. In 2018, the Royal Commission into Aged Care was launched by Prime Minister Scott Morrison after systemic abuses were revealed in the aged care system. The final report was delivered in March this year and highlighted patient abuse, poor working conditions and gaps in the system where care was unavailable. Unlike the Hayne Royal Commission, there wasn’t a direct outcome that affected the careers and livelihoods of those in the advice industry. But as is the case with all Royal Commissions, the public was watching and listening. Aged care is an important part of the retirement planning process and advisers now must deal with another industry having its perception shaped by media reporting. The one thing that wasn’t addressed by the Royal Commission was financing and - although the Government has backed more public funding into the system – there is likely another day of reckoning to come that will shape how the industry is funded.
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TOOLBOX
Full feature on page 16
SERVICING retail clients has become too hard and costly even for larger advice groups due to complex and challenging compliance requirements, according to Lifespan Financial Planning. Commenting on a significant drop in adviser numbers over the last two and a half years, Lifespan chief executive, Eugene Ardino, pointed out that the regulatory framework had become too difficult for many advisers. Along with the educational requirements, it was one of the key factors driving them away from the industry. He said that several large advice groups and institutions were often choosing not to service retail clients and those groups were shifting their focus on wholesale clients instead. “I do see some large licensee groups and small advice groups
saying that all this retail stuff is just too hard,” Ardino said. “There are too many minefields and there are too many risks involved so they are only going to deal with clients who meet the wholesale test where they don’t need to worry that much about most of the compliance and consumer protection requirements. “What I am saying is that a lot of the compliance requirements that are in place are just really difficult and costly and often most retail clients don’t have the capacity to pay the level of fee that advisers would have to charge.” On the other hand, clients who had met the test for the wholesale category were less protected by the range of consumer protections laws, such as best interest duty, conflicted renumeration or the statement of advice (SoA), among others, when Continued on page 3
Less than one-in-three chance of defending ‘know your client’ complaint BY LAURA DEW
FAILURE to ensure clients understand risk profile questionnaires can mean advisers fail the ‘know the client’ obligation and leave them open to a complaint, according to a report. Risk management firm, Fourth Line, conducted a survey of 1,100 complaints to the Australian Financial Complaints Authority (AFCA) between 2012 and 2020, around 12% of total complaints. Total complaints paid rose to $14.6 million in 2020, up from $8.6 million in the previous year. One such complaint pertained to a complainant describing how they were advised to change super fund to a higher-cost fund but the risk profile questionnaire used was deemed too complicated by the complainants, who lacked the necessary financial literacy to understand certain questions. Continued on page 3
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